Former SIGTARP Neil Barofsky On Bernanke's $1.2 Trillion In Secret Fed Loans To Wall Street

Aug. 22 (Bloomberg) -- Neil Barofsky, former special inspector general for the Troubled Asset Relief Program and a Bloomberg Television contributing editor, talks about the Federal Reserve's emergency loans during the financial crisis. Fed Chairman Ben S. Bernanke’s effort to keep the economy from plunging into depression included lending banks and other companies as much as $1.2 trillion of public money.  The largest borrower, Morgan Stanley, got as much as $107.3 billion, while Citigroup Inc. took $99.5 billion and Bank of America Corp. $91.4 billion according to a Bloomberg News compilation of data obtained through Freedom of Information Act requests, months of litigation and an act of Congress.

Full details inside.

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Citigroup Inc. (C) and Bank of America Corp. (BAC) were the reigning champions of finance in 2006 as home prices peaked, leading the 10 biggest U.S. banks and brokerage firms to their best year ever with $104 billion of profits.

By 2008, the housing market’s collapse forced those companies to take more than six times as much, $669 billion, in emergency loans from the U.S. Federal Reserve. The loans dwarfed the $160 billion in public bailouts the top 10 got from the U.S. Treasury, yet until now the full amounts have remained secret.

Fed Chairman Ben S. Bernanke’s unprecedented effort to keep the economy from plunging into depression included lending banks and other companies as much as $1.2 trillion of public money, about the same amount U.S. homeowners currently owe on 6.5 million delinquent and foreclosed mortgages. The largest borrower, Morgan Stanley (MS), got as much as $107.3 billion, while Citigroup took $99.5 billion and Bank of America $91.4 billion, according to a Bloomberg News compilation of data obtained through Freedom of Information Act requests, months of litigation and an act of Congress.

“These are all whopping numbers,” said Robert Litan, a former Justice Department official who in the 1990s served on a commission probing the causes of the savings and loan crisis. “You’re talking about the aristocracy of American finance going down the tubes without the federal money.”

(View the Bloomberg interactive graphic to chart the Fed’s financial bailout.)

Foreign Borrowers

It wasn’t just American finance. Almost half of the Fed’s top 30 borrowers, measured by peak balances, were European firms. They included Edinburgh-based Royal Bank of Scotland Plc, which took $84.5 billion, the most of any non-U.S. lender, and Zurich-based UBS, which got $77.2 billion. Germany’s Hypo Real Estate Holding AG borrowed $28.7 billion, an average of $21 million for each of its 1,366 employees.

The largest borrowers also included Dexia, Belgium’s biggest bank by assets, and Societe Generale SA, based in Paris, whose bond-insurance prices have surged in the past month as investors speculated that the spreading sovereign debt crisis in Europe might increase their chances of default.

The $1.2 trillion peak on Dec. 5, 2008 -- the combined outstanding balance under the seven programs tallied by Bloomberg -- was almost three times the size of the U.S. federal budget deficit that year and more than the total earnings of all federally insured banks in the U.S. for the decade through 2010, according to data compiled by Bloomberg.

Peak Balance

The balance was more than 25 times the Fed’s pre-crisis lending peak of $46 billion on Sept. 12, 2001, the day after terrorists attacked the World Trade Center in New York and the Pentagon. Denominated in $1 bills, the $1.2 trillion would fill 539 Olympic-size swimming pools.

The Fed has said it had “no credit losses” on any of the emergency programs, and a report by Federal Reserve Bank of New York staffers in February said the central bank netted $13 billion in interest and fee income from the programs from August 2007 through December 2009.

“We designed our broad-based emergency programs to both effectively stem the crisis and minimize the financial risks to the U.S. taxpayer,” said James Clouse, deputy director of the Fed’s division of monetary affairs in Washington. “Nearly all of our emergency-lending programs have been closed. We have incurred no losses and expect no losses.”

While the 18-month U.S. recession that ended in June 2009 after a 5.1 percent contraction in gross domestic product was nowhere near the four-year, 27 percent decline between August 1929 and March 1933, banks and the economy remain stressed.

Continue reading at Bloomberg...

Comments

[DailyBail]

Bank of America said it had erred by foreclosing on an elderly Florida couple, James and Sharon Bullington, who had the audacity to pay their mortgage a week early.

"We apologize to the Bullingtons," said the bank in an email to ABC News late Monday, "and we hope to have a response to them shortly." The bank in February had initiated foreclosure proceedings.

http://abcnews.go.com/Business/bank-america-moves-foreclose-florida-couple-paying-mortgage/story?id=14355558#.TlQyBKnZ454.facebook

It took the media getting involved to resolve this. Unbelievable.

[S. Gompers]

The Federal Reserve prints the money via the treasury, then loans it to the Government, who in turn gives it for free back to the Federal Reserve controlled banks as bailouts or low interest "loans" that never really get paid back, leaving the American taxpayer on the hook for the original loan amount to the government plus interest on the money that was given back to the banks...

Where can I get a job like that, and we call this Democracy...

The American taxpayer has been raped. The government, instead of convicting the rapist turned around and rewarded the rapist for a job well done...

And then the government and the banker raped the taxpayer one more time for good measure.

[Josie]

Note Barofsky's reference to the Inspector General for the Fed. Please DB, or somebody, send the video of that idiot talking with Grayson a few years back, i.e., the most important video posted on this site...

[Paul]

this is business as usual , wake up!

nothing new here...except for YOU.. the Emperor is Wearing NO Clothes